Driving Force Of Quality Upgrading In China

Product quality has been a hot topic in the international trade research area and improving the quality is also an important means to enhance foreign trade competitiveness.How to continuously improve china's product quality has a significant meaning for constructing of the new system for the open economy.This paper aims to analyze the upgrading driving force for the product quality.Good tools are prerequisite to the successful execution of a job.In order to analyze the way for quality upgrading,we must estimate the product's quality.Based on the 2000-2014 Chinese Customs Database,this paper estimates the HS8 product quality at firm-export country-year-trade terms dimension.In the accurate estimation,this paper used the unobserved demand variation from export country as the tool instrument which can overcome the pitfalls brought with the intermediate input exchange rate fluctuations because of the large share of the input traders.In addition,we assumes that different country has different export price elasticity and analyze Chinese export price elasticity which is in accordance with the recent research conclusions.Besides,this paper takes the relativity into the consideration,and revise the export quality with the world average import quality.Comparing the conclusion with Khandelwal et.al.(2013).OLS method as well as unit value method and summarizing the micro-level quality to the macro-level,and then compared with the results from Feenstra&Romalis(2014),we found that our conclusion is in the immediate domain not only at the micro-level,but also at the marco-level.Based on the estimation results,this paper analyze the basic condition for the Chinese export product quality from micro,macro,dynamics as well as variation aspects.We maintained that the quality has an increasing trend on the whole,and the growth rate averaged at 5.35%,the variation between 2000-2014 is very big and the portion of high quality is going up increasingly.And different firm type has different quality condition,and the disparities have narrowing with time.In sum,the quality strategy for the firm can be concluded that when the low-lever quality product enters into the export market,in order to compete in the competitive environment,it has to increase the quality until it reaches at a certain level and then the quality goes down and finally get out of the market.Under the framework of multi-product model,the paper endogenizing the quality and argued that the export quality is determined by the productivity,trade cost,export market scale,and product switching factors.Based on this,we categorized the upgrading driving force into technological-progress,product-switching,trade-facilitating and demand-shocking types,and find technological-progress type impetus shows inverted "U" change trend,while trade-facilitating and demand-shocking types show upward trend.With the most frontal analysis,we had the following conclusions concerning micro-level export product quality.First,the productivity and the export country scale have the positive relationship with the export product quality,and the trade cost has the negative relationship with the quality.And the positive effect brought by the productivity is significant higher than the upgrading effect brought by the decreasing trade cost and enlarging export country scale where the upgrading effect brought by the decreasing trade costs is higher than it brought by the enlarging scale.As for the product switching,the exit can improve the firm's quality from the broad sense and the narrow sense.In the broad sense,the product entry can decrease the level of quality while entry can increase the quality in the narrow sense.Secondly,for different regions,different types and different level of product quality,the firm's upgrading driving force has some differences.Compared with the eastern firms,trade-facilitating is a more efficient way for the middle and western firms,and for the state-owned firms,the effect of product-switching has the most obvious effect,especially from the narrow sense of product entry.The low-level quality firm improves the quality through raising the productivity while the upper-level quality firm take the measures of reducing the trade costs as well as the perfection of the exit mechanism.Thirdly,the technological-progress is the major driving force for the upgrading regardless of the heterogeneity.With the time passing by,the effect of the technology has decreasing while the effect of product-switching is increasing which is the core for the quality upgrading.This reflects that the sustainable way for quality upgrading is an inner one which can be attained through innovation,resources integration aimed at raising the productivity.Finally,we analyze export product quality upgrading in the macro-level,and find the impact of trade cost and market size on the export product quality is much higher than that of micro-level,It also reflects that the major channel how trade cost and destination market scale improving the quality of export products is optimizing the allocation of resources among firms,however they could improve the quality of export products by optimizing the allocation of resources within the firm.Further analysis shows that reducing tariff and non-tariff barriers to export products quality upgrading has been very little.